Canadian NAFTA auto rules of origin idea 'opposite' of United States goals: Lighthizer

The Canadian and Mexican officials were also positive about the progress, despite the division still evident over the $1.2 trillion trade pact. Now, that's looking increasingly unlikely.

Negotiators from the United States, Canada and Mexico are making progress on modernizing their trade agreement.

The serious engagement has hardly begun; none of the hard topics have been completed; other irritants like dairy have barely been touched; and negotiators are waiting to hear what US trade czar Robert Lighthizer says when he attends the talks Monday. "There is a lot more thinking to do", he told reporters on Thursday. "We have to have reciprocal trade".

Trump is expected to address trade in his State of the Union address on Tuesday night although it is unknown whether he will speak in broader terms or focus on the future of deals like NAFTA. By contrast, supporters say it helps the economy, improves global relations, and remains crucial for trade and growth.

The industry fears that if North American content demands are set too high, manufacturers will simply forego NAFTA's tariff-free access and pay low 2.5 percent US tariffs on parts and passenger cars produced outside the region.

When it comes to the agricultural side, it is true that fruits and vegetables and other imported goods are cheaper because of the free tariffs.

The United States, which has taken a more isolationist stance under President Donald Trump, wants big changes to the trilateral North American Free Trade Agreement. "We will engage both Mexico and Canada urgently, and we will go where these negotiations take us".

"And while there may be some anxiety along the way, I think that his negotiating style is right in line with what we can expect to be a great NAFTA II that will benefit American farmers and producers". The Canadian proposal would arguably strengthen the system for countries wishing to keep participating, but allow the U.S.to leave if it wants.

The president's trade stance has also contributed to tension with America's closest neighbours.

Canadian negotiators have countered with proposals for higher continental content requirements for automobiles, and on NAFTA's dispute-resolution mechanisms and five-year sunset clause. Previous rounds saw acrimony over a USA demand that 85 per cent of a car's parts be North American, and 50 per cent be American to avoid a tariff - a major increase from the current 62.5 per cent requirement.

Lighthizer said "some progress was made" in the latest round, while Freeland said she was pleased with progress so far and Guajardo said the three countries are on the "right track" to reach a deal.

Hanging over the talks is President Trump's threat to quit the 24-year-old trade pact. But with all three parties looking more likely to agree to an extension, talks seem set to continue - potentially for months and months.

But Mr. Lighthizer added a fair helping of his customary cantankerous assessment, suggesting Canada and Mexico are moving too slowly and calling one Canadian proposal a "poison pill". The dairy processor may be in a position to reap significant rewards from USA tax reforms, as nearly half of its business is located in the United States. Any NAFTA collapse would disproportionately impact agriculture in the United States, potentially costing many Americans their livelihood.

Despite a steep decline in US corn prices, with stocks sitting at a historic high, the buyer paid a premium for the Brazilian grain - as much as $2 more per tonne, according to trade sources. At the same time, domestic potato production is down 2 percent, and processors have been hampered by the delayed opening of several new processing plants. Chapters on telecommunications and e-commerce are also said to be near agreement. "We don't want to mess up any good things we got going".